Hi everyone, new to the forum. Glad I could find a place with like minded people are willing to help each other achieve financial independence.
My wife and I are both 26 and my goal is for us to stop working before turning 40 (with a caveat explained below). Our background is below, followed by the plan I've formed, and questions I have. Thanks!
BackgroundI have worked for the state government as an engineer for almost 4 years; my wife recently graduated and is about to start her first job as a nurse. I have a mortgage on our home which I purchased about 3 years ago. We intend to have a few kids; I'm personally aiming for 3 max starting around 2018, though I realize we don't have a lot of control over this.
For my work I make ~$90K/year, I have a pension (2%@55) which costs me about $7K/year based on my highest year salary, I get health insurance now and when I retire (5% paid per year of service), and I have the option of a 457b and a 401K.
For my wife's work she'll make about ~$90K/year, an option for health insurance we'll likely forgo, and has the option of a 401k and 403b. I believe she gets some percent match, but don't know the details yet. She may look for a different position within the year, but from what I have seen nursing positions here have similar salary/benefits.
Assets
Debts
- Student Loans @4-7% ~ $74K ($8K or $19K can possibly be repaid by a government grant)
- Parents ~ 6K
- Mortgage @3.625% ~ $185K
- Student Loans @2% ~ $18.5K
Yearly PlanAge 26 (2016)
- $18K to my 457b
- 2x$6.5K=13K to my 401K and her 403b
- 2x$5.5K=$11K to our IRAs
Age 27-39 (2017-2029)
- Maximize my 457b
- Maximize my 401k and her 403b
- When we make less than usual, (like if we take time off for children) contribute what is deductible to our IRAs.
- Payoff loans/mortgage in order of highest interest
Age 31 (2021)
- Borrow 2x$50K=$100K from our 401k/403b as a downpayment for a larger home. Probably around $500K.
- Either rent or sell our first home. If the price has increased from our original purchase price within 3 years, sell to not pay taxes on gains.
Age 39-40 (2029-2030)
- Both stop working
- Payoff 401k and 403b loans, rollover our 401k and 403b to an IRA
- Put our IRAs into SEPP. Assuming current numbers this will get us about $17K/year
Age 40-45 (2030-2035)
- Withdraw from my 457b to maximize the child tax credit. Assuming current numbers I'd need to withdraw around $45K/year which would empty my account in 6 years.
I don't see ourselves spending everything we withdraw here so put it somewhere we can utilize during the next time period.
Age 46-51 (2036-2041)
- Assuming kid(s) go to college, do my best to maximize scholarships / low interest student loans.
- Withdraw maximum amount of eligible education expenses.
- If necessary, my wife can work part time to take advantage of the Child Tax Credit / Additional Child Tax Credit.
Age 52-54 (2042-2044)
- Get a job with the state.
- To get health insurance one I retire I need to be enrolled in it within 120 days of officially retiring.
- This also has the added benefit of rebasing my pension on current salaries.
Age 55 (2045 - )
- Retire from state service
- Collect my pension - 40% of my highest year of salary
- Get health insurance fully paid for my wife and I.
- To mitigate inflation I'll have the remainder of our IRAs, also Social Securitys will kick in at some point.
If we get desperate we can do a reverse mortgage.
QuestionsDoes anyone have suggestions to fix or improve any details?
Any opinion on kids affect on financial independence, lol?
What do early retires do about health insurance/expenses? With this current plan we won't have coverage from age 40-51.
I have read mentions of HSAs around this forum but would love to read more if people have good links. I'm wondering if that's another option I or my wife can take advantage of to defer salary, or do most jobs only allow either health insurance or HSAs?